Multinational companies Operations Amidst Civil Violence Visa Vi Profit Potentials
Any business world over is driven by the profit incentive that is available. This implies that profit potentials should be evaluated well and if there is profit potential, then multinational companies have to continue working anywhere in the world irrespective of the civil violence. Civil violence in some places like South Africa Middle East and other places around the world should rather be taken like any other business challenges which do not need to be deserted but rather countered with technical approach and knowledge.
It should be remembered that insurance companies are always in place to cover their clients for such risks. For that matter therefore, it makes little logic to close operations simple because of civil violence yet insurance companies are in place to cover such risks. The biggest requirement would in such cases be that company property and employees are insured and then take on business. This would mean that civil violence is looked at like any other challenge in business which would not scare away a serious investor.
Research shows that civil violence against multinational companies always come as a result of disgruntlement resulting from lack of employment for youth and other employable groups of nationals in those particular countries. The best solution to such civil violence would be for multinational countries to develop policies which offer employment opportunities to nationals in countries hit by civil violence. This would mean that nationals would cease viewing multinational companies as exploitative but rather view them as partners in development.
Axetem’s Currency Exchange Rate Risk
Countries with civil violence against multinational companies definitely face currency exchange rate risks. Multinational companies usually boost investment potentials in countries where they exist. This implies that if they close operations due to civil violence or because of any other reasons, that particular country is likely to encounter issues of currency exchange. Mainly because of the following;
That particular country would find problems with, Balance Of Payments deficits. This is likely to be the case because since the multinational companies would have stalled, the country would resort to exporting almost everything, thereby using the local currency to buy international currencies like dollars, Euros, pounds and others. In such a scenario, the exchange rate is in most cases likely to be high, hence the currency exchange rate risk.
The other scenario would be that governments in such countries with civil violence against multinational companies would spend more of their local currency on their citizens who would have lost jobs. The longer such a circumstance would go, the higher the currency exchange rate would also go.
Potential Financial Risks of Axetem Reestablishing Operations In The Middle East With Regard To Currency Exchange
It is evident that Axetem is to reestablish operations in the Middle East under new and hostile terms of employing a sizeable number of people from the local population, who may be covered by law that they should be employed at a particular minimum wage. It that is the case, Axetem is faced with the risk of reestablishing operations with extra cost on workers than before it closed operations.
The other risk facing Axetem is how it is going to recover the rent fee it has been paying for the time it had stalled operations. From the $5million contract Axetem has with the government, is less as compared to the expenses it has to incur to reopen operations. It should be recalled that $240000 is already spent on rent, yet the company needs to cover other operational costs in order to resume operations.